Examining Gaps in Claims in Existing Health Insurance Schemes

Project background and significance

Poor households are regularly faced by unexpected events that can push them into poverty or extreme
poverty — a drought, a flood, a death in household, an illness, etc. Indeed, poverty is a source of
vulnerability (poor people are more likely to fall badly sick or to be affected by political events) and
repeated exposure to downturns reinforces poverty (Morduch 1999). Yet access to health insurance is
essentially non-existent among the poor in less developed countries. It is estimated that less than 1 % of
households are insured against health in rural areas in India. This lack of health insurance reflects
concerns about complicated design and delivery of insurance schemes, particularly with regard to how to
deal with fraudulent claims with the possibility of ending up with an adversely selected pool of clients.
Some of these concerns may be addressed when insurance is provided through microfinance, and indeed
Microfinance institutions (MFIs) are keen to provide health insurance in order to cover one of the biggest
risks their clients are exposed to.
However, there isn’t enough experience and evidence in the field, based on which MFIs can design and
implement insurance programs effectively. Some MFIs and NGOs that have started providing health
insurance recently find, in some cases, that there are gaps in claims of insurance benefits by clients. The
reasons for under or over claiming are unclear -- these could be ineffective product design or delivery
mechanism, lack of awareness, inaccessibility of healthcare providers or complicated claims and
reimbursement procedures, among others.
This project involves working with several micro-credit organizations, which have been providing health
insurance in the last one year and undertake a survey to understand the issues in providing insurance
through microfinance networks and clients' response to health shocks and use of insurance benefits. This
survey would identify the conditions that need to be covered by the insurance product as well as potential
difficulties with marketing and delivering insurance products in rural India. The results from the survey
will help understand behavior of poor people when faced with a health shock, their most important needs
and answer questions such as what aspects of insurance work and what don’t and what messages work?
The objective is to use these results to develop better insurance products and marketing and awareness
campaigns.

Programme description

MFIs are restricted legally in underwriting insurance schemes themselves, but they are allowed to act as
agents to insurance companies to provide and manage different insurance programmes. Insurance
products are often designed depending on the context in which the MFI operates but a typical micro
health insurance product covers: Hospitalization and Surgeries; Permanent Disability; Accidents and
Maternity. The cover is for one year and is usually available for the family unit comprising of member,
spouse and children. MFIs collect premiums in installments, often bundled with loan payments. ID cards
are issued to all members and insurance companies are moving towards a cashless system of
hospitalization, where the company reimburses the healthcare provider directly, instead of having to
reimburse the clients based on bills submitted.

Research design and analysis

The project would involve administering a one-time survey which identifies the conditions that need to be
covered by the insurance product as well as potential difficulties with marketing and delivering insurance
products in rural India.
• A short survey will be designed and administered to all clients of MFIs / NGOs who were covered
under health insurance schemes in the past 1-2 years. The survey records information on: incidence of
major and minor health shocks that are insured and other illnesses that affect the household; health care

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 providers consulted; expenses incurred on treatment, travel and other incidental expenses; whether
insurance was used for conditions that were eligible and if not, why not; and factors that influenced
clients to purchase insurance.
• The survey will be administered by loan officers during repayment meetings, wherever possible.
Otherwise, community health workers or local surveyors will be used to administer the survey in the
households in villages.
• Four partners have been identified, who have initiated a health insurance programme in the last 2
years - Grameen Koota, Karnataka; KAS Foundation, Orissa, Biswa, Orissa; and Seva Mandir, Rajasthan.
• In addition, we propose to collect data from hospitals and to match the numbers of claims with the
expected probability to be affected by such illnesses, in order to find out the extent of over-claiming or
under-claiming.
• Note on Survey methodology: Cell phone instruments are being tested as tools for collecting data.
The survey instrument is loaded as an application on the cell phone and responses are recorded on the
phone. This is hoped to reduce errors in data collection and increase monitoring and efficiency. It is also
hoped that it would help reduce costs incurred in data entry as the data can be transferred form the cell
phones directly.

Contributions

Incidence of illnesses and data on claims may be obtained easily, however, there is little evidence of how
poor people react to health shocks. A good understanding of the existing mechanisms they use, existing
sources of financing, access to health care providers and factors influencing decisions to purchase
insurance, among others, is crucial in designing a useful and effective health insurance products and
marketing for the poor. Several MFIs are keen to offer health insurance, however, there is very little
evidence and experience based on which they can develop products and develop networks with health
care providers who deliver the services. It is also expected that this survey can be replicated at any other
MFI/NGO providing health insurance and can indeed be administered by the MFI on a continuous basis.
The survey instrument has been tested and can easily be replicated. The survey can thus be conducted
with more organizations in the future.

Timeline and Details:

No. Name of Organization Type of Insurance and Insurer
and Location
1. Seva Mandir, Rajasthan Insurance against Death and Disability
(NGO) resulting from accidents and
operational / surgeries procedures;
RajaRajaeshwari Scheme, Oriental
India Insurance (Government Scheme)
2. Grameen Koota, Health Insurance for Surgeries,
Karnataka hospitalization and out patient
(MFI) diagnostics.
Arogya Raksha Yojana Scheme, ICICI
Lombard (Private company)
3. KAS Foundation, Health Insurance for critical illnesses,
Orissa accidents and hospitalization
(MFI) ICICI Lombard (Private company)
4. BISWA, Orissa Health Insurance for critical illnesses,
(MFI) accidents and hospitalization
ICICI Lombard (Private company)
Status
Survey has been administered
among 900 clients. Data
collection and data entry of all
records is complete.
Survey has been administered
among 1300 clients. Data
collection and data entry of all
records is complete.
Survey will be conducted early
2007.
Survey will be conducted early
2007.